Is it better for your credit to pay the balance on your credit cards in full or make the minimum payments?

Answer 1

Utilization is the word in the credit industry. This term describes the ratios and percentages of credit usage as compared to your credit limit. Since your credit file and score have no data on income, this is the only way for the complex credit scoring program to determine how much of your money you spend each month.

The target range for maximum scores is two to four revolving accounts. They need to be used (charged on) each month and they MUST be paid on time.

Charging no more than 30% of WHATEVER your credit limit is, and paying on the account in a timely manner can add 30 points to your score. For the purposes of obtaining a higher credit score, it doesn't matter whether you pay in full or make the minimum payment. Paying ON TIME is what is important. (Budget and financial considerations are another matter entirely. Paying the minimum payment on even a $3000 balance can cause consumers to pay thousands of dollars in interest and take years to pay the balance off.)

If you the pay the balance off continuously then you stand to get a few more perks from your credit card company (like the Gold Card), but there is nothing wrong with paying the minimum payment. Unfortunately, the longer it takes you to pay off your credit card debt the more interest you will be charged (which is over 19% in most cases.) If you have a good credit rating, please check out some other Credit Card Companies as many have lower interest rates.

From what I understand, the best way to increase your credit rate (by means of cards) is to maintain a small revolving balance. You have to use each account every month, but you shouldn't pay off each one in full every month. Reason for this is that card companies report to the bureaus once a month after receiving your payment. All they look at is your limit, balance and timeliness of payments. If your balance is $0 every month on each account, then you're not showing any activity. If you always maintain a balance of at least a dollar, this shows the bureaus that you're actually using your accounts and paying interest (very little at $1).